Green Mountain Zigzags On Skepticism, New Partnership Chatter

By Teresa Rivas

Green Mountain Coffee Roasters (GMCR) reversed its earlier losses after a skeptical story in this weekend’s Barron’s, and was recently rising 2%.

The shift may be due to a bullish note out today from KeyBanc analyst Akshay Jagdale, who reiterated a Buy rating and $90 price target on the stock, who shrugged off concerns about competition for the company’s K-Cups and anticipates a new partnership for the company: “We believe sales growth will eventually accelerate on the back of new channel penetration, brewer innovation, international expansion, new beverage opportunities and stabilization of share losses,” Jagdale wrote. “To that end, we view partnership announcements (new brands/products and extension of existing partnerships) as a leading indicator of an acceleration in sales growth.”

“We expect the Company to announce at least one new partnership (in a new channel) and extend its existing deal with The J.M. Smucker Company ( SJM) in the upcoming weeks and months,” he said.

However, not all analysts are as bullish as Jagdale. Today also saw Stifel Nicolaus’s Mark Astrachan and Edward McPike reiterate their Sell rating on the stock and mid-$40 fair value estimate. Although they boosted their EPS model slightly and expect the company’s next earnings report to surprise on the upside, they write “At current levels, the coffee cost benefit is largely reflected in GMCR shares and offsets weakening fundamentals, in our view. Specifically, we anticipate decelerating sales growth to continue driven by peaking household penetration of K-Cup brewers, increasing competition from unlicensed brands, and worsening price/mix.”

Green Mountain reports third-quarter earnings on Wednesday. The shares are up 261% in the past year.

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